The Senate Finance Committee, on a vote of 13 to 1, has approved a three-year
phase-out of the capital gains tax.
For proponents of the capital gains phase out — and we are among them — the fight has only begun. Winning before the Senate Finance Committee is only a first step. The measure still needs Senate approval, House committee and full House approval, and likely will become the subject of some compromise before it finally reaches the governor’s desk.
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The arguments are familiar. The opponents continue to raise concerns about lost revenue (they say $60 million annually), maintaining this is only a tax break that will benefit the privileged class. Proponents argue that we overtax our wealthiest residents and a capital gains reduction will spark further economic development, helping executives determine whether to locate here or expand facilities in Rhode Island.
Lost in the argument is that the capital gains tax phase-out will benefit countless Rhode Islanders, spanning all classes. It will benefit those who sell real estate, from the homeowner to the small businessman or woman, and those with mutual funds.
Non-retirement mutual funds, during the normal course of activity, are subject to reportable capital gains.
And it is not just the wealthy who sell homes and small businesses, or buy and sell stocks, maybe only within the context of a mutual fund set up to provide funds for a child’s education or a downpayment on a home.
The victory in the Senate Finance Committee is a first step in what will still be a difficult struggle to enact what we perceive as a very important tax reform measure in Rhode Island.
